Correlation Between X FAB and Treasury Wine

Can any of the company-specific risk be diversified away by investing in both X FAB and Treasury Wine at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining X FAB and Treasury Wine into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between X FAB Silicon Foundries and Treasury Wine Estates, you can compare the effects of market volatilities on X FAB and Treasury Wine and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in X FAB with a short position of Treasury Wine. Check out your portfolio center. Please also check ongoing floating volatility patterns of X FAB and Treasury Wine.

Diversification Opportunities for X FAB and Treasury Wine

0.58

Correlation Coefficient

X FAB  Treasury Wine

Very weak diversification

The 3 months correlation between XFB and Treasury is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and Treasury Wine Estates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Treasury Wine Estates and X FAB is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on X FAB Silicon Foundries are associated (or correlated) with Treasury Wine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Treasury Wine Estates has no effect on the direction of X FAB i.e., X FAB and Treasury Wine go up and down completely randomly.

Pair Corralation between X FAB and Treasury Wine

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to generate 2.02 times more return on investment than Treasury Wine. However, X FAB is 2.02 times more volatile than Treasury Wine Estates. It trades about 0.19 of its potential returns per unit of risk. Treasury Wine Estates is currently generating about -0.23 per unit of risk. If you would invest  457.00  in X FAB Silicon Foundries on October 5, 2024 and sell it today you would earn a total of  35.00  from holding X FAB Silicon Foundries or generate 7.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

X FAB Silicon Foundries  vs.  Treasury Wine Estates

X FAB Silicon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days X FAB Silicon Foundries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, X FAB is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Treasury Wine Estates

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Treasury Wine Estates has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with X FAB and Treasury Wine

The main advantage of trading using opposite X FAB and Treasury Wine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X FAB position performs unexpectedly, Treasury Wine can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Treasury Wine will offset losses from the drop in Treasury Wine's long position.

The idea behind X FAB Silicon Foundries and Treasury Wine Estates pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.